Appeal Dismissed: Unconscionable Dealings Requires Proving Special Disadvantage

The Court of Appeal dismissed an appeal claiming relief against unconscionable dealings, holding that the claimant did not prove a special disadvantage affecting her ability to judge her best interests.

OUTCOME: Dismissed

[ADDRESS] of Appeal

CITATION: [NAME_1] v [NAME_2] & Anor [2005] NSWCA 73

HEARING DATE(S): 20 October 2004

JUDGMENT DATE: 22 March 2005

JUDGMENT OF: Giles JA at 1; [NAME_3] at 90; Bryson JA at 103

DECISION: Appeal dismissed with costs.

CATCHWORDS: Relief against unconscionable dealings - elderly widow mortgages home to one son-in-law to secure a loan - arrangement for simple interest and no payment until sale or death - mortgage erroneously provides for compound interest and payment on demand - widow finds out and becomes distressed and concerned about "foreclosure" - son-in-law does not allay her concerns - adverse stance in correspondence - widow wished to be rid of the mortgage - transferred home to another daughter and son-in-law who paid out the mortgage - transaction improvident - widow died before trial - whether judge erred in not accepting her affidavit evidence where disputed unless corroborated - whether widow under special disadvantage because unaware that mortgage could be rectified - whether transferees took advantage of opportunity presented by the disadvantage - no error as to affidavit - on facts, not shown that under special disadvantage or that advantage taken. D

Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419; Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51; Blomley v Ryan (1956) 99 CLR 362; Bridgewater v Leahy (1998) 194 CLR 457; CASES CITED: [NAME_5] v [COMPANY_6] of New South Wales (CA, 4 September 1987, unreported); [COMPANY_7] Australia v Amadio (1983) 151 CLR 337; Fox v Percy (2003) 214 CLR 118; Louth v Diprose (1992) 175 CLR 61; Wilton v Farnworth (1948) 76 CLR 646.

[NAME_9] - Appellant PARTIES: [NAME_12] - First Respondent [NAME_14] - Second Respondent

FILE NUMBER(S): CA 41244/03

[NAME_16] - Appellant COUNSEL: [redacted]

[NAME_18] - Appellant SOLICITORS: [redacted]

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): ED 4537/01

LOWER COURT JUDICIAL OFFICER: Austin J

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 41244/03 ED 4537/01

GILES JA [NAME_3] JA

Tuesday 22 March 2005 [NAME_1] v [NAME_2] & ANOR Judgment 1 GILES JA: The proceedings were commenced by summons. An order was not made for formal or informal pleadings to define the issues, as at least with the benefit of hindsight would have been desirable. The trial before Austin J was conducted as a claim to relief in the exercise of equity's jurisdiction to relieve against unconscionable dealings. His Honour declined to grant relief. 2 Both parties accepted his Honour's statement of the elements of a case of unconscionable dealing, formulated with reference to Wilton v Farnworth (1948) 76 CLR 646, Blomley v Ryan (1956) 99 CLR 362, [COMPANY_7] Australia Ltd v Amadio (1983) 151 CLR 337, Louth v Diprose (1992) 175 CLR 61 and Bridgewater v Leahy (1998) 194 CLR 457. The statement was - "105 … a case of unconscionable dealing involves the following: (a) the weaker party must, at the time of entering into the transaction, suffer from a special disadvantage vis-a-vis the stronger party;

(b) the special disadvantage must seriously affect the weaker party's capacity to judge or protect his or her own interests;

(c) the stronger party must know of the special disadvantage (or know of facts which would raise that possibility in the mind of any reasonable person);

(d) that party must take advantage of the opportunity presented by the disadvantage; and

(e) the taking of advantage must have been unconscientious. 106 I would only add that, as cases such as [NAME_20] v [NAME_21] show, once ingredients (a), (b) and (c) are established, and the improvidence of the transaction is shown, the plaintiff's task is made easier by an equitable presumption to the effect that the improvident transaction was a consequence of the special disadvantage, and that the defendant has unconscientiously taken advantage of the opportunity presented by the disadvantage."

The judge's decision 3 His Honour referred to cases in the area of discourse being "fact-specific". It will be necessary to go to the facts in a little detail, including some of their many disputed areas. An initial outline of the circumstances in which the relief was claimed, and of the judge's reasons for declining to grant relief, is appropriate. 4 [NAME_22], a widow then in her seventies, owned and lived in a property at Kianga. The property was mortgaged to one of her sons-in-law, [NAME_23], the husband of a daughter [NAME_23]. The arrangement between [NAME_26] and [NAME_23] was that simple interest of 10 per cent would run on the mortgage advance, but that principal and interest would not be payable unless [NAME_26] sold the property and would be paid out of her estate upon her death. 5 The mortgage [NAME_26] signed, however, provided for interest at 10 per cent compounding daily and for repayment of the principal on demand. [NAME_26] became aware that the mortgage provided for compound interest. She became distressed about the compounding of interest, and that [NAME_23] would "foreclose" under the mortgage. 6 [NAME_26] then transferred the property to a daughter and another son-in-law, [NAME_2] and [NAME_2]. [NAME_27], solicitor, acted for both parties on the transfer. Under her arrangement with [NAME_2], they paid out the mortgage and entered into an agreement with [NAME_26] intended to permit her to live in the property for as long as she wished. 7 [NAME_26], and upon her death her executrix, [NAME_1], claimed to have the transfer of the property set aside in the exercise of the equitable jurisdiction. His Honour held that it had not been established that in the transfer of the property [NAME_26] was under a special disadvantage affecting her ability to make a judgment as to her best interests. 8 His Honour accepted that the transfer of the property was an improvident transaction. He nonetheless said, and it was not in dispute in the appeal, that improvidence of itself did not make an unconscionable dealing, and emphasised that it was necessary to establish a special disadvantage, being a "disability, condition or circumstance … which seriously affects the ability of the innocent party to make a judgment as to his own best interests" ([COMPANY_7] v [NAME_31] at 461). 9 His Honour did not accept [NAME_2]' submission that [NAME_26] was robust, in context meaning physically robust, and found that at the time of the transfer she was frail and had physical problems which would eventually contribute to her death. But his Honour continued - "117 On the other hand there is clear evidence that she was a strongly independent person who had no difficulty understanding such matters as the application of compound interest and, later, a transaction by which she transferred her property to the defendants in exchange for release from her loan obligation and a right of residence for life. As Mason J emphasised in the [NAME_31] case, in the passage quoted above, the issue is not whether there is a disadvantage or disability, rather whether that condition seriously affects the ability of the weaker party to make a judgment as to her own best interests. In my opinion the evidence overwhelmingly establishes that in November 1998 [NAME_26]'s disabilities and disadvantages did not have that effect. 118 Even the leading cases in this area tend to be fact-specific. Nevertheless a useful comparison can be made between the facts of this case, essentially a case of a frail and capable woman striking a bargain with her daughter and son-in-law to secure for herself residence for life and freedom from the threat of compound interest and foreclosure, and the facts of such cases as, respectively, [NAME_32] v [NAME_33] , [NAME_20] v [NAME_21] , [NAME_34] v [NAME_35] and even [NAME_36] v [NAME_37] . There is not, here, an uneducated and dull-witted person giving away his share of his wife's estate without understanding its value, or an aged alcoholic negotiating a transaction at an undervalue while being plied with rum, or an infatuated middle-aged man whose feelings were manipulated for gain, or a very old and frail man whose intention to transfer his property at an undervalue was procured by his nephew and business partner, on whom he depended. That [NAME_26] did not have any such dependence on [NAME_2] is demonstrated by what subsequently happened when their relationship fell apart." 10 His Honour then referred to a number of other matters on which [NAME_1] relied. Some of them arose in the appeal in different guises, and I will return to them as necessary. The first was that [NAME_26] knew that under the mortgage arrangement only simple interest was to be charged and that [NAME_2] "misrepresented the situation to her mother, and raised a false concern that compound interest would be charged". For reasons he gave, the judge "disagree[d] with this contention on the facts". The second was that [NAME_2] concealed their intention to obtain a transfer of the property from [NAME_26]. The judge did not accept that they kept the information from other family members "where they had, or arguably had, a duty to disclose their intention". The third was that [NAME_2] misrepresented to [NAME_26] the effect of the residence arrangement accompanying the transfer of the property. The judge considered that the representations were consistent with the rights [NAME_26] probably obtained, and that "to the extent that those rights may have been based on equitable estoppel, their conduct contributed to the creation of the rights". 11 The judge continued - "125 While I disagree with the submissions of counsel for the plaintiff concerning misrepresentations with respect to compound interest and the residence arrangement, and the allegation of concealment, in my opinion the establishment of these contentions would not have given rise to a case of unconscionable dealing, in the absence of the ingredient of special disability. No case of fraudulent or innocent misrepresentation was pleaded. Even if, because of these matters, it could be said that [NAME_26] and [NAME_2] were in the position of unequal bargaining power, Australian law does not recognise inequality of bargaining power as a ground, as such, for intervention in contractual arrangements: [COMPANY_7] v [NAME_31] , at 461 per Mason J. 126 In my opinion [NAME_26] did not have the benefit of independent advice, because [NAME_38] was acting for [NAME_2], who stood to benefit from the transaction, as well as for [NAME_26]. The advice he gave her, while helpful in some respects, did not seek to ensure that she was freed from the effects of such disabilities as she had. It would certainly not have removed the presumption of unconscientious advantage that would have arisen had the ingredients of the doctrine been established. But lack of independent advice is not itself a ground for equitable intervention, as the cases to which I have referred make clear. 127 My conclusion is that none of the matters to which the plaintiff has referred overcomes the fundamental deficiency in the plaintiff's case, namely that the first and essential ingredient for the application of the equitable doctrine, the existence on the part of [NAME_26] of a special disadvantage, has not been established, and consequently the other ingredients for the application of the doctrine cannot be made."

The case on appeal 12 [NAME_1]'s argument on appeal was more narrowly focussed than at the trial, where the special disadvantage on which she relied appears to have been rather Protean. For her contention that his Honour was in error in failing to find that [NAME_26] was under a special disadvantage, she relied solely on the special disadvantage that [NAME_26] was unaware that the mortgage was not binding in its terms as to compound interest and repayment. She said that despite the terms of the mortgage [NAME_26] was entitled to live in the property until sale or her death without obligation to make payment of principal and interest (although that rather overlooked that compound interest would mean less money for [NAME_26] on sale or her beneficiaries). 13 If the special disadvantage were accepted, other matters would arise. In aid of her principal contention, [NAME_1] also contended that his Honour erred in the approach he took to the evidence by affidavit of [NAME_26], who had died prior to the trial, in his findings as to the genesis of the transfer of the property, and in the view he took of the residence arrangement.

The facts in more detail. 14 The evidence was extensive and replete with inconsistencies and conflict. In what follows I take up the focus on the special disadvantage for which [NAME_1] now contends, and in that respect I sometimes supplement the judge's findings by other references to the evidence. I will come to [NAME_1]'s subsidiary contentions as to the facts later in these reasons. 15 In 1996 [NAME_26], then aged 71, owned and lived in a home unit at Narooma. In March 1977 she sold the home unit and bought the property [ADDRESS], Kianga for $145,000. She did not have enough money for the purchase, and was lent $48,000 by the [NAME_23]. [NAME_23] became the [NAME_39]. 16 [NAME_40], solicitor, acted for [NAME_26] and [NAME_23]. [NAME_26] declined to obtain independent legal advice. [NAME_40] had died prior to the trial, and why he prepared the mortgage to provide for compounding interest and payment prior to sale or death was not revealed. 17 In April 1997 [NAME_40] sent the draft mortgage to [NAME_23] for approval. [NAME_23] did not reply. In October 1997, after the transfer of the property to [NAME_26], [NAME_40] wrote again to [NAME_23] asking for instructions about the mortgage and its registration. The judge said that [NAME_23] "gave evidence relevant to these matters but it was confused and unconvincing". This description was well merited. 18 The judge said - "34 What appears to have happened is that [NAME_23] arranged for signature of the draft mortgage without referring back to [NAME_40]. The mortgage, in the form drafted by [NAME_40], was executed by [NAME_26] and [NAME_23], as sole [NAME_39], and dated 26 April 1997. [NAME_26]'s signature was witnessed by [NAME_1], and [NAME_23]'s signature was witnessed by [NAME_42] (evidently [NAME_1]'s husband)." 19 [NAME_1] is another daughter. Although the judge did not specifically refer to it, in her affidavit [NAME_26] said that [NAME_43] asked whether she understood everything in the mortgage and had it been explained to her, to which she replied yes, and that [NAME_43] then asked [NAME_23] if he had explained the mortgage to [NAME_26] and he replied yes. [NAME_23]'s evidence included that he explained the mortgage but "overlooked" the compounding interest – "I mean, if I knew it was there and what it meant I would have deleted it". Implicit in the judge's finding was that at the time she signed the mortgage [NAME_26] did not know that it provided for compounding interest and payment on demand. 20 At a time which was contentious, but which his Honour found was about February 1998, [NAME_26] was made aware that the mortgage provided for compounding interest. [NAME_1] told [NAME_2] of the mortgage. [NAME_1] also told [NAME_2] of the compounding interest and of her concern that the [NAME_23] would be owed more than the property was worth when [NAME_26] died, and asked [NAME_2] to "break the news" to [NAME_26], was disputed between them. Whatever passed between [NAME_1] and [NAME_2], it led to [NAME_2] telling [NAME_26] about the compounding interest. The judge appears to have accepted [NAME_26]'s affidavit evidence so far as [NAME_26] said that she was told by [NAME_2] that the [NAME_23] were "using her", were charging compound interest, and "In a couple of years Chris and Jeff will own the property and you'll be out. You'll have nothing." 21 The judge appears also to have accepted [NAME_2]'s evidence that [NAME_26] became very distressed. He did not fully accept some evidence of one of [NAME_26]'s sons, [NAME_44], but accepted that [NAME_26] probably told him after this occasion that the mortgage papers she signed should have been explained to her, that [NAME_23] was charging 10 per cent compound interest, and that she was very worried. That [NAME_26] was concerned was amply shown and was not really in dispute. 22 The worry extended to what the family referred to as foreclosure, clearly enough not the legal concept but meaning that [NAME_26] could be turned out of the property. The judge said - "49 … [NAME_2] said that her mother told her of a telephone conversation in which [NAME_23] said that if her mother continued to dispute the debt, [NAME_23] would foreclose the mortgage. [NAME_46] gave similar evidence. That is denied by [NAME_23], although he conceded he may have mentioned to his wife or someone else in the family the idea of foreclosing on the mortgage, which he recollected someone was "bandying about". It is unnecessary for me to find that [NAME_23] made such a threat, and it would be difficult to do so on the evidence for me, but I do find that, for whatever reason, [NAME_26] was very concerned that foreclosure would occur." 23 [NAME_23] gave evidence which included that he became aware that charging compound interest was causing "major problems" in the family and that he took steps to have [NAME_40] change the mortgage so that it no longer provided for compounding interest. A number of aspects of his evidence presented difficulties. The judge did not find it necessary to resolve them. He said that it was sufficient that any steps taken by [NAME_23] towards replacing compound interest with simple interest in the mortgage were ineffectual, and that as far as the evidence went nothing was sent to [NAME_26] for signature. He appears to have accepted that [NAME_23] became aware of [NAME_26]'s worries, as indeed emerges from the resort to solicitors which ensued. What is plain is that the simple course was not adopted of [NAME_23] telling [NAME_26] that he stood by the original arrangement despite the terms of the mortgage and that she had no cause for concern. Evidence of [NAME_23] to the effect that she told [NAME_26] in one or more conversations that [NAME_26] did not have to pay interest and the mortgage would be changed, and that she told [NAME_2] the same, was evidently not accepted by the judge. 24 [NAME_26] consulted [NAME_38] in March 1998. [NAME_38] had previously acted for [NAME_2]. [NAME_2] made the appointments and drove [NAME_26] to see him. On some of the occasions [NAME_2] was with [NAME_26] and [NAME_38] when they talked, on others [NAME_26] saw [NAME_38] alone. [NAME_38] gave evidence, but was asked remarkably little about what passed between him and [NAME_26] and him and [NAME_40]. He did not have a good recollection of what took place in and in connection with acting for [NAME_26]. 25 [NAME_38] wrote to [NAME_40] on 5 March 1998 asking for a copy of the mortgage. There was no evidence of whatever consultation with [NAME_26] caused him to do so. [NAME_40] sent [NAME_38] a copy of the mortgage on 9 March 1998. The document in the bundle bore the imprint of payment of stamp duty and a dealing number, and had apparently been lodged for registration. This may not have been the correct document. In unknown circumstances, the mortgage came to be registered on 29 July 1998. It was common ground, however, that the mortgage [NAME_40] sent provided for compounding interest and payment on demand. 26 [NAME_38] prepared a new will for [NAME_26], which she signed on 11 March 1998. [NAME_26] gave the whole of her estate to [NAME_2]. A letter annexed to the will set out reasons why she did not leave any of her estate to her other children. In the case of [NAME_23], the reason given was that [NAME_23] knew [NAME_23] had placed a 10 per cent compound interest rate on the mortgage loan and did nothing about it. In the case of [NAME_1], it was said that [NAME_1] knew [NAME_23] had placed a 10 per cent compound interest rate per annum on the mortgage loan and did not tell [NAME_26] of it or explain it until well after the mortgage had been put in place. 27 [NAME_38] sent a copy of the mortgage to [NAME_26] on 12 March 1998, his letter saying "Please let us have your further instructions". According to [NAME_2], she was with [NAME_26] on 12 March 1998 when he "explained the interest component to her", at which time he expressed surprise that the mortgage had been presented to her for signature. The judge made no finding as to a consultation on 12 March 1998, and the correspondence seems against one on that date. 28 On 18 March 1998 [NAME_40] wrote to [NAME_38]; there was no evidenced of intermediate contact between them. The letter was headed "Without prejudice", and read - "We refer to the above matter and to our letter dated 9th March, 1998 as enclosing copy of Mortgage Document. You will note that Annexure A to the document sets out the terms and conditions of the Mortgage loan and noting that there is a requirement for the Mortgagor to pay interest upon the principal sum at the rate of 10% per annum and as calculated on a daily basis. We note the date of the Mortgage being the 26th April, 1997 and our client would therefore require repayment of the principal amount and in addition interest calculated at the set rate from that date. We advise that the interest due and payable in addition to the principal amount is $4,287.12." 29 The interest amount was simple interest at 10 per cent. The letter seemed to contemplate immediate repayment of the mortgage advance and to affirm an entitlement to compound interest, but it claimed only simple interest. 30 [NAME_38] replied to [NAME_40] on 24 March 1998. The evidence did not show whether he had by this time received further instructions from [NAME_26]. The letter read - "We refer to your letter of the 18th March, 1998 and note the contents. You will be aware that the mortgage was signed by our client without the benefit of any legal advice with regard to the same. In such circumstances it seems to us that there was a clear conflict of interest from your firm as acting on the part of the [NAME_39]. Our client is 72 years of age and is in poor health. Preliminary discussions with our client indicate that she had no knowledge whatsoever that she was paying interest on the loan funds at 10% per annum on a compounding basis. We will be seeking further instructions and will be in touch in due course." 31 [NAME_40] wrote to [NAME_38] on 31 March 1998. There was no evidence of the telephone conversation to which his letter referred. The letter was again headed "Without Prejudice", and read - "We refer to the above matter and to previous correspondence herein and to our recent telephone conversation. We note that you are obtaining further instructions. Our client would like to resolve the matter by way of payment out including some form of interest. We would be grateful if you could obtain your client's immediate instructions so that we may resolve the matter to the satisfaction of all parties." 32 [NAME_40] wrote again to [NAME_38] on 3 April 1998. Once more the letter was headed "Without Prejudice". It read - "We refer to the above matter and to previous correspondence herein. We note that [NAME_23], the wife of [NAME_39] in these proceedings has had a discussion with your client who is in fact her mother. We understand that your client now concedes that the debt is outstanding and she is aware of the debt and that there is an interest component. At this stage we do not know whether the property is to be sold and the mortgage debt is to be discharged or whether refinance is to be organised. Also we are not sure whether in fact your client is prepared to sign an acknowledgement or some form of acknowledgement that the debt is outstanding and that the debt will then be a debt due and payable by her estate upon her decease. We would appreciate you obtaining further instructions." 33 [NAME_23] gave evidence, including of the conversations with [NAME_26] to which I earlier referred, there was no evidence identifying the discussion to which the letter referred. None of the conversations of which [NAME_23] gave evidence fits with what the letter says of the discussion. 34 On 8 April 1998 [NAME_38] wrote to [NAME_40] saying that he was obtaining instructions. He wrote to [NAME_26] enclosing a copy of the letter of 3 April 1998 and asking for instructions. 35 [NAME_40] wrote to [NAME_38] again on 8 April 1998. Again the letter was headed "Without Prejudice". It read - "We refer to the above matter and to previous correspondence herein and in particular to our letter dated 3rd April, 1998. Our client is most anxious to have a resolution to this matter one way or another. Please advise, as a matter of urgency, whether you have any instructions and whether your client proposes to sell the property and pay out our client the amount due under the Mortgage or whether or not she will be arranging for alternate finance. We would appreciate an early reply and we thank you in anticipation." 36 On 16 April 1998 [NAME_38] wrote to [NAME_26] enclosing a copy of this letter and asking for instructions. 37 [NAME_38] had a file note of a conference with [NAME_26] on 22 April 1998. It read - "1. Renegotiate to an interest rate regulated by reference to a bank int.

2. Acknowledgement by M'ee that the principal and int. to be payable on the death or voluntary sale of the house.

3. Distressing to have the possibility of foreclosure at any time." 38 [NAME_38] wrote to [NAME_40] on 23 April 1998 - "We refer to your letter of the 8th April and note the contents. We have had the further opportunity of discussions with our client who again impresses upon us that she was completely unaware that there was an interest component as part of the mortgage. Given the circumstances it would seem to us that the proper course would be to, with your client's consent, renegotiate the terms of the mortgage to a mutually agreeable format. In that regard it is suggested that perhaps the mortgage was regulated by reference to a bank interest rate. In addition, our client is most concerned that the [NAME_39] has the ability under the current terms of the mortgage to call up the principle [sic] and interest at any time. Given the circumstances and our client's distressed condition it would be suggested that perhaps the documentation could be redrawn to reflect that the principle and interest accruing was to be paid on the death of our client or alternatively on the voluntary sale of the property. We look forward to your early advice." 39 Until communications in November 1998 arranging for discharge of the mortgage, so far as the evidence went there the solicitors' dealings ended. The suggestion of re-drawing the documentation plainly found no favour. The mortgage was registered on 29 July 1998 in unchanged form. 40 I have said that [NAME_38] did not have a good recollection. A reading of his evidence gives little confidence in anything but a broad remembrance. While the judge did not do so, I think it can be summarised as -

(a) belief that the mortgage provided for compounding interest and was repayable on demand, and that "there was a possibility of foreclosure of the mortgage at any time";

(b) instructions that compounding interest and repayment on demand was not the arrangement as [NAME_26] had understood it; and

(c) instructions that [NAME_26] wanted to be rid of the mortgage to [NAME_23]. 41 That [NAME_26] wanted to be rid of the mortgage stood out in [NAME_38]'s evidence. He said that [NAME_26] was well aware of the "value of the transaction", meaning the transfer of the property which at that point in his evidence was placed in March 1998, and that "she was adamant for me to conduct the transfer"; that she was "concerned about the mortgage"; that she "insisted and was passionate about transferring the property"; and that the effect of the words expressing her passionate desire was that "she was to specify the mortgage that was on her property [sic] and she wanted to transfer the property and get rid of the mortgage". He said that [NAME_26]'s concern was having a mortgage on the property, that she was distressed that she had a mortgage on the property and wanted it removed, that she thought she was at risk because the mortgage was in place, and that she "was adamant that she have this mortgage removed and they were my strict instructions". I will return to this when considering the special disadvantage for which [NAME_1] contended. 42 In the result, the transfer of the property got rid of the mortgage. There was particular conflict in the evidence of the genesis of the transfer of the property to [NAME_2]. 43 The judge accepted, from [NAME_26]'s affidavit, that she contacted a son, [NAME_44], and a grand-daughter for financial assistance of some kind, although not with a specific transaction in mind. He did not accept that, on a similar approach to [NAME_2], they were the ones who suggested that [NAME_26] "sign the property over" to them in return for payment of the money and interest owed to the [NAME_23] and exclusive lifetime occupancy of the property. He said - "71 [NAME_2] put the matter differently, saying that her mother repeatedly asked her and her husband to buy the Kianga property from her for the amount owing to [NAME_23]. [NAME_2] denied ever having made an offer, and maintained that all times the offers were made by her mother. This is one of the occasions where [NAME_26]'s affidavit evidence is contradicted and it would be unsafe to rely on it. I therefore accept [NAME_2]'s account. 72 [NAME_2] gave evidence that in around October 1998, [NAME_26] said to her: 'If you can get rid of the debt to [NAME_48], you can have the house in consideration of all that you have done for me over the years in looking after me, as long as you promise not to put me in an old persons' home.' She gave similar evidence in her supplementary affidavit made on 7 March 2003. [NAME_46] gave similar evidence. Insofar as this evidence seeks to attribute to [NAME_26] a motive of rewarding [NAME_2] for all of their care and attention over the years, it is not supported by other evidence of [NAME_26]'s motive and, being self-serving, I have decided it would be unsafe to accept it." 44 Apart from the motivation of reward, his Honour appears to have accepted that in about October 1998 [NAME_26]'s suggestions to [NAME_2] came to a head in the manner described by [NAME_2]. In her supplementary affidavit [NAME_2]'s evidence of the conversation was that it followed her taking [NAME_26] to see [NAME_38], the consultation being between [NAME_38] and [NAME_26] without her being present, with [NAME_26] afterwards saying that [NAME_38] was a really nice man and "I am finally going to get Jeff off my back". The judge referred to evidence in [NAME_26]'s affidavit of seeing [NAME_38] about transferring the property to [NAME_2], which he placed at "evidently in late October 1998" it seems because in the affidavit it was shortly before the transaction took place. He referred to evidence from [NAME_2] about being asked to go to [NAME_38]'s office where [NAME_38] put a proposal that the property be transferred to them in return for them paying out the mortgage and giving [NAME_26] a right to live in the property. The timing was linked with [NAME_46] then, on 5 November 1998, making a loan application to the Commonwealth Bank for $60,000 to obtain money for the transaction. 45 That his Honour found in this manner is confirmed by his rejection of the submission of counsel for [NAME_1] that he should find that [NAME_2] "conceived and planned the November 1998 transaction many months earlier, no later than December 1997". His Honour said - "75 ... He relied on documents produced by [NAME_50], which indicate that a file was opened in the name of [NAME_2] for the purchase of the Kianga property on 5 December 1997.

76 The file includes some handwritten notes prepared by [NAME_46] and headed "Contract for Sale", recording that the proposal was for a sale price of $1 plus assumption of the [NAME_23] mortgage. Counsel asks the Court to infer from the fact that this document, though undated, appears as the first document in a file that appears to be chronologically arranged, that it was prepared in about December 1997 rather than in, say, November 1998.

77 I am not prepared to make that inference. The other evidence to which I have referred points to the conclusion that the November 1998 transaction developed after [NAME_26] became aware that the mortgage provided for compound interest, in late February or early March 1998. The fact that the handwritten note contains a reference to the loans manager of the Commonwealth Bank, to which [NAME_46] made an application only on 5 November 1998, tends to suggest that the notes were created at that time rather than in December 1997. All one can say on the evidence in the [NAME_50] file is that the firm opened a file, presumably on instructions from [NAME_2], with respect to a proposed "purchase" of the Kianga property in December 1997, and that that file was closed on 29 April 1998. There is no basis for inferring that the purchase transaction was on the terms that became the November 1998 transaction." 46 On 10 November 1998 [NAME_38] wrote to [NAME_40] with a view to discharge of the mortgage. [NAME_40]' reply of 11 November 1998 included, "For your information, and subject to our clients [sic] confirming instructions we enclose herewith on a without prejudice basis the calculation of interest as at 11 November 1998." On 12 November 1998 [NAME_40] sent the same calculation of interest, not expressed to be on a without prejudice basis. The calculation was of simple interest at 10 per cent. [NAME_40] wrote again on 13 November 1998, saying he held a signed discharge of the mortgage and that his client "confirms that the calculation of interest forwarded to you under cover of our letter of 12th November 1998 is correct". 47 On 17 November 1998 [NAME_38] sent to [NAME_26] a copy of the calculation of mortgage repayment. 48 On 24 November 1998 [NAME_26] attended upon [NAME_38] and signed a contract for sale and a transfer of the property to [NAME_2] for a stated consideration of $1. [NAME_38] witnessed her signature. On that day he wrote to [NAME_26] - "We are pleased to confirm Contracts for the Sale of the above property was exchanged on the 24th November, 1998. As soon as we have the Transfer to hand we will make arrangements for you to sign it. It is necessary for you to keep all insurances in respect of the property in force until settlement takes place. We note that the consideration for the transfer of the property is $1.00 and that the mortgage currently over the property will be paid out by [NAME_2]. Part of the arrangement is that [NAME_2] will enter into the Deed of Agreement, a copy of which is attached which provides you with a life tenancy arrangement over the property. Should there be any additional matters that might be relevant to the tenancy arrangement then you might discuss them with the writer at your convenience." 49 On the same day [NAME_38] wrote to [NAME_2] - "We advise that contracts were exchanged on the 24th November, 1998. We note that the consider [sic] for the transfer of the property is $1.00. We confirm that we are attending to payment of stamp duty on the Contract and Transfer. Part of the arrangement is that you will enter into a Deed of Arrangement, a copy of which is attached which provides [NAME_26] with a life tenancy arrangement over the property. Should you have any matters you wish to discuss with the writer please contact the writer at your convenience." 50 The transfer is dated 24 November 1998, and despite the second sentence of the letter to [NAME_26] appears to have been signed on that day. [NAME_38] witnessed [NAME_26]'s signature as transferor, and signed the transfer as solicitor for the transferees. 51 On 29 November 1998 [NAME_26] and [NAME_2] signed the Deed of Agreement. The parties were [NAME_26] as [NAME_2] as Grantor. All under the heading "RECITALS", the Deed of Agreement provided - "1. The Grantee has agreed to sell and the Grantor has agreed to purchase the property [ADDRESS], Kianga in the State of New South Wales.

2. The Grantee agrees to sell and the Grantor agrees to purchase the property for the sum of $1.00.

3. In consideration of the transfer of the property [ADDRESS], Kianga to the Grantor the Grantor shall give to the Grantee full free and exclusive licence to use the 'residence'.

4. The Grantor agrees that the Grantee does not have to pay or contribute towards rates or the upkeep of the property.

5. The rights of the Grantee are not assignable.

6. No relationship of landlord and tenant is deemed to be created by this Deed of Agreement.

7. The Grantor is not liable for any injury, accident or damage caused to the person or property of the Grantee or any invitee of the Grantee." 52 The transaction was completed on 17 December 1998. Using the money borrowed from the Commonwealth Bank, $55,890.39 was paid in discharge of the mortgage. The interest paid was simple interest at 10 per cent.

[NAME_26]'s affidavit 53 The proceedings were commenced by a summons filed on 11 September 2001. [NAME_26] swore an affidavit dated 16 October 2001. She died on 25 December 2001. [NAME_1] submitted that the judge was in error in deciding that the evidence in the affidavit should not be accepted, where disputed, unless there was corroboration. 54 The judge said - "7 Notwithstanding an objection on behalf of [NAME_2] on the ground that the evidence could no longer be tested by cross-examination, I allowed [NAME_1] to tender in evidence the affidavit of [NAME_26] made on 16 October 2001. Although admissible, [NAME_26]'s evidence has to be treated with great care, in my opinion. It is clear from reading the affidavit that the deponent was very hostile to [NAME_2] at that time. Most of the assertions in the affidavit are challenged by [NAME_2]. This is precisely the sort of case where the Court is most likely to be assisted, in determining the credibility of a witness, by observing the witness giving oral evidence and responding to cross-examination.

8 I have decided that, in these circumstances, the correct approach is not to accept [NAME_26]'s evidence where it is challenged by the defendants' evidence, unless there is some external corroboration." 55 For some time from November 1998 [NAME_26] lived alone in the property. By late 1999 the relationship between [NAME_26] and [NAME_2] had become strained, and it worsened after [NAME_2] moved into the property with [NAME_26]. [NAME_26] moved out of the property at the end of 2000. In January 2001 she revoked her power of attorney in favour of [NAME_2]. In a will she made on 2 March 2001 she excluded [NAME_2]. Whoever was in the right, there is no doubt that [NAME_26] was hostile to [NAME_2] as at October 2001, and the hostility is evident in the affidavit. 56 [NAME_26]'s affidavit could be used notwithstanding that she could not be cross-examined, see Pt 38 r 9(3) of the Rules. Its weight was another matter, to which this hostility was important. As well, the affidavit was plainly incorrect in important respects – for example, the account of dealings with [NAME_38] is incomplete and wrong when measured against the correspondence and other documents earlier mentioned. 57 An illustration of his Honour taking the approach he announced can be seen in his [71] set out above. However, there was not a blanket rejection of the evidence in [NAME_26]'s affidavit. It was an approach, not an inflexible rule. The judge did not always decline to accept [NAME_26]'s evidence because it had been by her affidavit: for example, although he preferred the early 1998 placement of the conversation when [NAME_26] was told of compounding interest over [NAME_26]'s placement of some months after April 1997, he did so not because of conflict with the evidence of [NAME_1] and [NAME_46], but because of when [NAME_26] first saw [NAME_38]. Nor did he always decline to accept [NAME_26]'s evidence where it was disputed, even if uncorroborated. For example, he considered it probable that [NAME_26] asked [NAME_44] and her grand-daughter for assistance of some kind, but less likely that she would have approached them with a specific transaction in mind; this involved rejection of [NAME_2]' evidence that she told them of a specific transaction proposed to [NAME_44]. 58 The judge's approach is in accordance with authority. In [NAME_5] v [COMPANY_6] of New South Wales (CA, 4 September 1987, unreported) Mahoney JA observed that "experience has shown that it is proper to treat with considerable reserve evidence, or the inference from evidence, which has not been subjected to cross-examination", and in Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419, where a witness had been discharged prior to cross-examination, the Court said at [188] – [191] - "188 There appears to be no direct authority as to how a court should deal with the evidence of a witness discharged in such circumstances. There is, however, some authority as to how to deal with evidence upon which there has been no opportunity to cross-examine, because, for example, a witness had died. It has been held that such evidence is admissible but that the "'court [would] not attach so much weight to it as it would have been done if there had been an opportunity of cross-examination', Daniell's Chancery Practice, 6th Ed, p 786" : Estex Clothing Manufacturers Pty Ltd v Ellis & Goldstein Ltd (1967) 116 CLR 254 at 263. In that case, a witness who had died by the time the trial came on for hearing swore two contradictory affidavits. Windeyer J said at 263: 'The latter I think makes the former of no weight; and it can itself be of little or no weight in the circumstances, except to the extent that it is supported by documents which accord with other evidence to which I shall come later.' 189 Abadom v Abadom (1857) 24 Beav 243 is to the same effect. There it was held that whilst an affidavit of a witness who had died could be read, the court would ' pay much less attention to it than the other evidence' . 190 The case of R v Stretton (1988) 86 Cr App Rep 7, is perhaps closer to this. The complainant in a sexual assault trial took a series of epileptic fits during the course of her cross-examination. She was discharged from giving further evidence. The trial judge allowed the trial to proceed but gave the jury a warning in terms that if they were of the view that the defendant was deprived of the opportunity of properly testing and probing the complainant's evidence, he 'advised' they should acquit the defendant. If, however, as a matter of ' commonsense and fairness' they considered they had had ' a fair and complete opportunity of judging her credibility' they should assess the case accordingly. [ADDRESS] of Appeal held that it was a matter for the trial judge's discretion as to whether to permit the trial to continue and no error had been shown in the manner in which he had exercised that discretion. 191 Likewise, in Meyer v Hall (1972) 26 DLR (3d) 309, it was held that it was a matter for the discretion of the trial judge as to the weight to be given to the evidence of a witness who could not be cross-examined, including if the trial judge thought appropriate, ignoring the evidence." 59 In my opinion, in the circumstances his Honour was correct in treating [NAME_26]'s evidence with great care, and did not err in the approach he announced.

The genesis of the transfer of the property 60 [NAME_1] submitted that the judge was in error in finding the genesis of the transfer of the property in [NAME_26]'s requests to [NAME_2] to buy the property from her for the amount owing to [NAME_23]. She submitted that his Honour should have found, in accordance with [NAME_26]'s affidavit, that when first telling [NAME_26] of the compounding interest [NAME_2] suggested, "If you sign the property over to us you can stay here for the rest of your life", and that thereafter when [NAME_44] had been unable to provide assistance [NAME_2] said, "If you sign the property over to us now we will give you an exclusive lifetime occupancy of the house and we will pay all moneys owing and interest to the [NAME_23]". According to the submission, [NAME_2] were intent on acquiring the property from as early as December 1997, and that they were so intent was supported by [NAME_38]'s file opened on 5 December 1997 and the other matters in the judge's [75]-[77] above. 61 It was not clear how this was said to bear upon whether [NAME_26] was under the special disadvantage for which [NAME_1] contended, as distinct from whether [NAME_2] took advantage of any special disadvantage. In any event, I am not persuaded that the judge's finding has been shown to be incorrect. 62 [NAME_38] had a file, file 11972W, endorsed as a purchase of the property by [NAME_2] from [NAME_26]. The file cover was also endorsed as opened on 5 December 1997 and closed on 29 April 1998. It contained the handwritten notes to which the judge referred, but for the reason his Honour gave, plus the fact that they included settlement figures for 11 November 1998, the notes can not have dated from December 1997. Although not referred to by the judge, the file also contained a copy letter from [NAME_38] to [NAME_26] dated 12 March 1998 and a memorandum of fees in terms appropriate for preparation of a contract for an arms length sale through an agent, although with file identification 11971W, and in the case of the letter specifically referring to sending the contract to an agent for sale. The file also contained a copy letter to [NAME_26] dated 26 May 1998 (also 11971W) enclosing "copy Contract we prepared on the proposed sale of your property", on a natural understanding meaning the same contract as was referred to in the letter of 12 March 1998. 63 [NAME_38] seemed to accept that he was instructed on a sale to [NAME_2] as at December 1997 and March 1998, but could not explain or add to what might have occurred. His evidence really did not go beyond the documents, and the documents were in a particularly unsatisfactory state which was matched in that respect by [NAME_38]'s recollection. [NAME_38] said he only prepared one contract for the sale of the property, that does not fit with the letter of 12 March 1998. Whatever may have occurred in late 1997 had apparently resulted in the contract of March 1998, and had run its course by the end of April 1998. 64 In my view, that is what his Honour meant when he said that there was no basis for inferring that the December 1997 purchase transaction was on the terms that became the November 1998 transaction. [NAME_2] denied any earlier transaction, and it was necessary for his Honour to take into account the objective indications of a December 1997 transaction. But in the unsatisfactory state of the evidence I do not think the file provided the incontrovertible facts or incontestable testimony of which Gleeson CJ and Gummow and Kirby JJ spoke in Fox v Percy (2003) 214 CLR 118 at [28] whereby his Honour's finding is impugned.

The residence arrangement 65 The Deed of Agreement was a badly drawn document. [NAME_1] submitted that, contrary to [NAME_38]'s letters of 24 November 1998, it did not give [NAME_26] a life tenancy, and that it did not properly protect an entitlement to live in the property for as long as she wished. Again it was not clear how this was said to bear upon whether [NAME_26] was under the special disadvantage for which [NAME_1] contended. 66 The judge said of the Deed of Agreement - "87 Although this poorly drafted instrument speaks in terms of a "licence", [NAME_46] gave evidence that [NAME_38] told him and his wife that the document would allow [NAME_26] to live in the Kianga property as long as she wanted to. [NAME_2] accepted the offer on that basis. It seems to me probable, though it is not necessary to decide the point, that [NAME_26] acquired out of these arrangements a right to remain in the Kianga property for life, either by way of an oral partly performed contract to confer a life interest, or an irrevocable contractual licence, or a licence coupled with an equity arising out of estoppel." 67 As I have said, one of the matters on which [NAME_1] relied before the judge was misrepresentation of the effect of the residence arrangement, but the judge did not agree that there had been misrepresentation. At the time, according to the evidence his Honour accepted, [NAME_26] and [NAME_2] all intended that [NAME_26] should have an entitlement to live in the property for as long as she wished. That [NAME_38] may have failed properly to embody that intention in the Deed of Agreement does not contribute to [NAME_26] being under the special disadvantage of unawareness that the mortgage was not binding in its terms as to compound interest and repayment. I see no reason to disagree with the judge's tentative view of the residence arrangement, but [NAME_1]'s submission does not assist her case of a special disadvantage.

Consideration of the special disadvantage 68 The special disadvantage for which [NAME_1] contended on appeal was not one of illness, infirmity, lack of education, illiteracy or some such matter. [NAME_26] had the capacity, in respects of that kind, to make a judgment as to her best interests. In a manner not prominent at the trial, the special disadvantage was said on appeal to be that [NAME_26] did not know of something material to her making a judgment as to her best interests, that the mortgage was not binding in its terms as to compound interest and repayment. [NAME_1] submitted that [NAME_26] in truth had no reason to be worried or distressed, because the mortgage would readily have been rectified, and that she did not know of the ready rectification because [NAME_38] failed to advise her of it. It was squarely put that [NAME_38] disregarded his duty to [NAME_26] and "It is for that reason and that reason alone that she remained under a disadvantage, a special disadvantage". 69 [NAME_1]'s submissions did not elaborate on special disadvantage constituted by unawareness of something material to a judgment as to one's best interests. [NAME_2] submitted that the postulated unawareness in this case was not a special disadvantage, but that in any event it had not been established that [NAME_26] suffered from it. 70 In [NAME_20] v [NAME_51] J said at 405 - "The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary . The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-a-vis the other." (emphasis added) 71 Kitto J at 415 did not refer to lack of assistance or explanation where assistance or explanation was necessary. His Honour spoke of "illness, ignorance, inexperience, impaired faculties, financial need or other circumstances", without elucidation of ignorance. As was made plain in [COMPANY_7] v [NAME_31] at 461-3, the circumstances stated in [NAME_20] v [NAME_21] were not exhaustive. Mason J said that they were "no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition or circumstance is placed at a special disadvantage vis-à-vis another … ", with the ensuing reference to a "disabling condition or circumstance … which seriously affects the ability of the innocent party to make a judgment as to his own best interests". 72 Mere unawareness of a matter material to the interests of a party to a transaction is not a special disadvantage. That is a commonplace of commercial and other negotiations, and good conscience does not require the other party to guard against the party inadequately informing himself any more than it requires the forfeiture of a superior bargaining position (see Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at [10], [15]-[17], [56], [185]). 73 If the unawareness is due to a condition or circumstance of the kind to which Fullagar and Kitto JJ referred, equitable principles of unconscionability arise. If the unawareness is not for that reason, but is due to misrepresentation or statutory misleading or deceptive conduct or amounts to vitiating mistake under contractual principles, relief may be available, but these distinct principles are not swallowed up by an amorphous concept of unconscionability. As Gleeson CJ remarked in Australian Competition and Consumer Commission v C [COMPANY_53] at [7] - "In everyday speech, "unconscionable" may be merely an emphatic method of expressing disapproval of someone's behaviour, but its legal meaning is considerably more precise." 74 This remains the case if the unawareness is because the party has been badly advised. Notwithstanding the bad advice, the party may have the capacity to make a judgment as to his best interests. It may be a flawed judgment because the capacity is exercised upon incomplete knowledge or bad advice, but there is an important difference between a person under a condition or circumstance disabling him from making a sound judgment and a person who is able to make a judgment but fails to make a sound one. 75 The key words in Fullagar J's reference to lack of assistance or explanation are the rider, "where assistance or explanation is necessary". Assistance or explanation may be necessary because the party is of reduced cognitive capacity, or because the matter is entirely beyond the party's experience and unassisted comprehension. There can thereby be a condition or circumstance falling within the general principle founded on seriously weakened ability to make a judgment as to one's own best interests. But there must be a need for assistance or explanation, and even then where assistance and explanation have been provided the courts should be slow to spread the consequences of bad advice from the adviser to the other party to the transaction, if the assistance and explanation are thought wanting, on the basis that the party was under a special disadvantage. 76 In the present case, I do not think it necessary to take this question further. Assuming that there could be the postulated special disadvantage, constituted by unawareness that the mortgage was not binding in its terms as to compound interest and repayment, for the reasons which follow I do not think it was established that [NAME_26] suffered from that disadvantage in deciding upon the transfer of the property. 77 [NAME_26] knew that the arrangement with [NAME_23] was for simple interest, and for principal and interest to be payable upon sale of the property or out of her estate upon her death. The occasion for her worry and distress, confirmed when a copy of the mortgage was provided through [NAME_38] in March 1998, was that the mortgage provided for compounding interest and repayment of the principal on demand. She knew that the mortgage was wrong, and believed that she had signed under a mistake, indeed in circumstances of deception: the letter annexed to the will of 11 March 1998 can convey nothing less. 78 [NAME_38] must have been made aware of all these matters. His letter of 23 April 1998, in stating that [NAME_26] was unaware of "an interest component as part of the mortgage" and suggesting a bank interest rate, is odd, although the letter also reflects instructions that there was to be repayment only on sale or after death. The whole letter is difficult to reconcile with [NAME_38]'s firm remembrance that [NAME_26] wanted to be rid of the mortgage, in that it proposed renegotiation of the mortgage. The probable explanation, in my view, is that [NAME_26]'s wish to be rid of the mortgage was qualified in the conference of 22 April 1998 by the possibility of renegotiation, leading to a proposal in a badly framed letter which so far as the evidence went received no response. When there was no response, being rid of the mortgage was reinstated. 79 The occasion for [NAME_26]'s worry and distress went beyond mere disconformity between the original arrangement with [NAME_23] and the terms of the mortgage. As I have said, the simple course was not adopted of [NAME_23] telling [NAME_26] that he stood by the original arrangement despite the terms of the mortgage and that she had no cause for concern. The letters from [NAME_40], to [NAME_26]'s eyes transmitting [NAME_23]'s position, were to the contrary. This must have had a significant effect on [NAME_26]'s decision upon her course of action. 80 In dealing with the submission that [NAME_2] "misrepresented the situation to her mother, and raised a false concern that compound interest would be charged", the judge said - "120 I disagree with this contention on the facts. In my opinion, while the evidence shows that [NAME_26] understood the basic agreement she had made with [NAME_23], under which he would be entitled to charge interest of 10% per annum, with principal and interest payable in the event of her death or voluntary sale of the property, there seems to have been a difference between them as to whether interest was to be charged on a compounding basis. 121 I agree with the evidence of [NAME_38] that the [NAME_23] mortgage entitled [NAME_23] to charge interest at a compound rate calculated daily. It was open to [NAME_23] formally to alter the arrangements, and his evidence indicates that he knew how to go about doing so, but he did not see to it that the mortgage was varied to remove the right to charge compound interest. It is true that during their correspondence with [NAME_50] in 1998, [NAME_40] gave indications that their client would not charge interest on the compound basis. That could be inferred by a close reading of the letter of [NAME_40] dated 18 April [sic: March] 1998, although the position could certainly have been made clearer by the drafter of the letter. Then it appeared, by the letter of [NAME_40] dated 31 March 1998, that [NAME_23] was prepared to negotiate for "some form of interest". Only by their letter of 11 November 1998 did [NAME_40] spell out the way in which simple interest would be calculated. But these letters were written "without prejudice", implying that [NAME_23] sought to preserve his strict legal right to charge compound interest. 122 For [NAME_2] to say, as a lay person in February 1998, "they are charging you compound interest", was not a misrepresentation. It emerged, but only subsequently, that [NAME_23] would charge only simple interest, but he sought to preserve his rights and did not implement a variation to the mortgage, and instead the mortgage was registered in its unvaried form. I do not accept the proposition that [NAME_38] had any obligation to explain to [NAME_26], in her distressed state, that [NAME_23] proposed to charge only simple interest, in circumstances where the proposal was without prejudice, nothing had been done to vary the mortgage, and then the mortgage was registered in its unvaried form." 81 In my opinion, this was a rather kindly view of [NAME_23]'s position as conveyed by [NAME_40]'s letters. I speculate that behind the letters lay a correct belief, as at March-April 1998, that [NAME_26] intended to put the property on the market, correct because of [NAME_38]'s letter of 12 March 1998 and memorandum of fees apparently directed to preparation and provision to an agent of a contract for sale. Neither party so suggested, by the course of evidence or in submissions, and I do not think I can do more than speculate. Even if it be so, and it would operate favourably to [NAME_1] in the view taken of [NAME_40]'s letters, [NAME_23]'s position would have appeared to [NAME_26] as one of adversity. The letters are important for what they did not say as well as for what they did say. 82 [NAME_40]'s letter of 18 March 1998 was equivocal. It referred to an entitlement to compounding interest but contemplated acceptance of simple interest. [NAME_38]'s letter of 24 March 1998 explicitly took issue with compound interest. [NAME_40]'s reply of 31 March 1998 did not say that there was no question of compound interest. It could easily have been seen as holding over [NAME_26]'s head the entitlement to payment of compound interest, as a threat calculated to cause her to pay the mortgage out. That threat was visible in [NAME_40]'s letter of 3 April 1998, referring to sale or refinancing. The letter also referred to [NAME_26] acknowledging a debt payable on her death, when what should have been said was that [NAME_23] acknowledged that under the arrangement at the time the $48,000 was lent it was repayable out of [NAME_26]'s estate unless the property was sold prior to her death. The letter of 8 April 1998 was still more direct, asking for a "resolution" by advice of sale or refinancing. There should have been nothing to resolve. There was more than a "difference" over charging compound interest. 83 A proposal for resolution, by [NAME_38]'s letter of 23 April 1998, was apparently ignored. It is entirely understandable, in the circumstances, that [NAME_26] should have wanted to be rid of the mortgage. It was not enough for her to have it established that she only had to pay simple interest and did not have to pay anything until sale or death. She must have wanted to be entirely free of the trouble [NAME_23] was causing, trouble which in her eyes stemmed from deception at the time she signed the mortgage. [NAME_26] conveyed this by what she said to [NAME_2], it seems accepted by the judge, "I am finally going to get Jeff off my back". That the mortgage could readily have been rectified, if correct, would not have been what mattered to [NAME_26]. She did not want a rectified mortgage to [NAME_23]. She wanted severance from [NAME_23]. 84 It was submitted on behalf of [NAME_1] that the mortgage would have been rectified, in the sense of corrected, if [NAME_26] had asked. The submission relied on [NAME_23]'s stance in these proceedings. That was not his stance in 1998, and the submission should not be accepted. If it came to rectification by legal proceedings seeking the relief of that name, [NAME_23]'s stance at the time did not suggest that the mortgage could readily have been rectified. [NAME_38] advised [NAME_26] as to rectification, his advice could not have been that she would obtain the relief easily, without expense and stress and with certainty of success. 85 That comes to the heart of the special disadvantage for which [NAME_1] contended, failure by [NAME_38] to advise [NAME_26] that the mortgage could readily be rectified. [NAME_38] gave no direct evidence, and was not directly asked, about advice or lack of advice upon rectification of the mortgage. The closest the evidence came was one question in cross-examination - "Q. So that when you said that it was distressing in respect of the possibility of foreclosure, did you have any discussion with [NAME_22] that might have disabused her of the matters leading to her distress? A. I don't have any recollection of that, no." 86 It may be a proper inference that [NAME_38] did not advise [NAME_26] that the mortgage could readily be rectified. As I have indicated, I do not think he could properly have so advised her, and if he had done so his advice would probably have resulted in his taking a firmer stance in the correspondence with [NAME_40]. But I do not think it should be inferred that in what passed between [NAME_38] and [NAME_26] there was no regard to rectification of the mortgage. The evidence was unsatisfactory, perhaps in part because there was not the focus at the trial on the special disadvantage now under consideration but also because of [NAME_38]'s poor recollection and the lack of confidence inspired upon reading his testimony. It is quite possible that, when [NAME_26]'s resolve was to get [NAME_23] off her back, advice as to court proceedings seeking relief by way of rectification of the mortgage was given but not found attractive. The evidence did not exclude that, nor was it an unlikely situation. 87 What occurred at a number of stages of this unfortunate family dispute has not become known fully or clearly in the course of these proceedings. We must work with the evidence as it is. I am not satisfied that, assuming that [NAME_26] could have been under a special disadvantage constituted by unawareness that the mortgage was not binding in its terms as to compound interest and repayments, she was disadvantaged in that respect so as to be unable to decide upon transfer of the property as the course in her best interests. It was a rational decision to be rid of the mortgage, in the manner I have explained in order to get [NAME_23] off her back. The decision did not turn on inability to bring legal proceedings to have the mortgage rectified, and rationality can and often should include avoiding legal proceedings. Although rectification may well not have been to the fore in whatever advice [NAME_38] gave to [NAME_26], it was not established that he failed to advert to it as a matter for consideration in [NAME_26] deciding upon the transfer of the property as the way of getting rid of the mortgage. Nor do I accept, as was suggested on behalf of [NAME_1], that [NAME_26] erroneously believed to the end that [NAME_23] was insisting on compound interest, since she was sent the calculation of mortgage repayment, on simple interest, on 17 November 1998.

Conclusion 88 In the manner the appeal was conducted, if the special disadvantage for which [NAME_1] contended is not accepted there is left the judge's finding of "a strongly independent person who had no difficulty in understanding … a transaction by which she transferred her property to the defendants in exchange for release from her loan obligation and a right of residence for life". It may be added, however, that unless the judge's finding as to the genesis of the transfer of the property be overturned it would be difficult to find that [NAME_2] took advantage of the opportunity presented by [NAME_26]'s disadvantage. They were not shown to have known anything about availability of relief by way of rectification of the mortgage, or of advice given or not given to [NAME_26] on that subject. Again, the focus at the trial was otherwise. 89 In my opinion, the appeal should be dismissed with costs. 90 [NAME_3]: This is a case not about principle but its application. I would adopt the statement of the trial judge at [105] of his careful judgment, concerning unconscionable dealing: "105 … a case of unconscionable dealing involves the following: (a) the weaker party must, at the time of entering into the transaction, suffer from a special disadvantage vis-a-vis the stronger party;

(e) the taking of advantage must have been unconscientious." 91 As becomes clear, I agree respectfully in the result reached by Giles JA, but consider that it depends solely on the absence of (c) above and what then follows for (d) and (e) above. 92 I would, however, gratefully adopt Giles JA's comprehensive elucidation of the factual circumstances surrounding this unfortunate case. 93 Where I respectfully differ from the trial judge and from Giles JA is that I do consider that the late [NAME_26] was at a special disadvantage. That special disadvantage lay in [NAME_26]'s unawareness that the mortgage was not binding in its terms as to compound interest and her incomplete awareness concerning the fact that simple interest and principal was only to be paid on her death or on earlier voluntary sale of the property. Her lack of awareness meant that she did not appreciate the strength of her legal position, whatever may have been her appetite to defend it. I agree that mere unawareness of a matter material to the interests of a party to a transaction, as this was, may not per se be a special disadvantage. However, this was a case of "lack of assistance or explanation where assistance or explanation was necessary", where it is well established that special disadvantage may reside. In order that she, being elderly and obviously highly anxious and distressed about the mortgage, should be in a position to make an informed decision in her best interests, as to whether to press her undoubtedly strong case for rectification, she needed to be properly informed about her position. It is wrong in principle to speculate that she might still, had she known the true position, have chosen not to press her strong legal position for rectification in order to be rid of the mortgage problem as she perceived it; that is, by instead gifting the property to [NAME_2] in return for a life estate. We simply do not know what she would have done, properly advised. 94 Lacking that advice, [NAME_26], a widow in her 70s in poor health, was desperately anxious about "foreclosure" of her home by her son-in-law [NAME_23]. She was clearly the weaker party in her dealings with her other son-in-law and daughter, [NAME_2], in resorting to them for a solution. At a disadvantage by reason of her ignorance of the strength of her true position vis-à-vis [NAME_23], she entered into an arrangement for them to: (a) relieve her of what she perceived as an escalating liability at compound interest (which they replaced with a viable mortgage, then standing at under $60,000 well below the value of the property), and (b) provide her with what was intended to be a proper life tenancy, but turned out to be an impaired, inadequately drafted "exclusive licence"; and importantly not one whereby she could insist on exclusive possession, leaving her entirely vulnerable when relations broke down with [NAME_2]. 95 For that, she transferred her property, worth around $185,000, to [NAME_2] for a nominal amount. They were then able to repay the [NAME_23] loan at simple not compound interest by [NAME_23] replacing the loan. That of itself indicated that his obduracy about altering the mortgage was not necessarily matched by legal confidence that he could have resisted a properly advised [NAME_26] in rectification proceedings, had she been aware that she could have brought them. 96 The trial judge, while accepting her physical frailty and acute anxiety, understandable given her ignorance of her legal rights, was in no doubt as to her being "a strongly independent person who had no difficulty understanding such matters as compound interest" (at [117]). It is true that she understood that she was exchanging her property "for release from her loan obligation and a right of residence for life" (at [117]). But this is with the crucial qualification that she was ignorant of her legal rights. She was advised by a solicitor ([NAME_38]) acting also for [NAME_2]. [NAME_38] appears never to have told her that she could threaten rectification proceedings, against [NAME_23], and that she could be confident that if pursued she had a legal entitlement to obtain rectification. 97 In that state, she was in the situation described by Mason J in [COMPANY_7] Australia Ltd v Amadio (1983) 151 CLR 447. Her unadvised ignorance of her rights, in dealing with [NAME_2] when using their solicitor, meant that she lacked the ability, as the weaker party "to make a judgment as to her own best interests". 98 Nor is it to the point to speculate that she might still have done what she did vis-à-vis [NAME_2], even properly advised, in the absence of clear evidence to that effect. There is no suggestion in the solicitor's letters on her behalf of any asserted right to rectify as distinct from mere assertion or request. That leads to the inference that this was no part of his advice to [NAME_26]. 99 The trial judge pointed out that cases such as Blomley v Ryan (1956) 99 CLR 362 establish that once the first three ingredients of unconscionable dealing quoted above are made out there is an equitable presumption that the stronger party has taken advantage of the opportunity presented by the weaker party's disadvantage and that stronger party's taking of advantage must have been unconscientious. [NAME_2] evidently had no problem getting [NAME_23] to charge only simple interest on discharge of the mortgage, and they knew too that [NAME_26] was receiving advice from [NAME_38], their solicitor too. But that of itself does not satisfy the third requirement, namely knowledge on the [NAME_2]'s part, of the special disadvantage, or of facts which would raise that possibility in the mind of a reasonable person. [NAME_2] have not been shown to have been responsible for [NAME_26] choosing [NAME_38] to advise though no doubt their prior connection with [NAME_38] was seen as a convenient reason for using him, despite the potential conflict. Nor have they been shown to have been responsible for any shortcomings on the part of [NAME_38] in the drafting of [NAME_26]'s intended life interest or otherwise. None of this suffices to demonstrate unconscientious taking advantage by them of [NAME_26]'s disadvantage. That disadvantage, as put again on this appeal, was simply her unawareness that the mortgage was not binding in its terms, as to compound interest and repayment, with the consequence that it was amenable to rectification. 100 That conclusion is not contradicted by the fact that the defective life interest added to the improvidence of the transaction. This is because it is not established that [NAME_2], as reasonable laypersons, would have, or should have, appreciated its legal shortcomings. It meant, however, that when relations later broke down with [NAME_2], [NAME_26] gave up her co-residence with [NAME_2] and left them in full possession, having given away her interest in the remainder for $1 and lacking a clear right to exclusive life-time possession. 101 As I have earlier concluded, there remains a fundamental impediment in the way of [NAME_1] to succeed. As Giles JA observes, [NAME_2] "were not shown to have known anything about availability of relief by way of rectification of the mortgage, or of advice given or not given to [NAME_26] on that subject". The stronger party "must know of the special disadvantage (or know of facts which would raise the possibility in the mind of any reasonable person)". Absent that knowledge, it is not possible to show that [NAME_2] unconscientiously took advantage of the opportunity presented by [NAME_26]'s disadvantage. The appellant failed to establish that essential matter. Thus though she was at a special disadvantage, that cannot be considered in a vacuum. This is more especially when that disadvantage relates to absence of knowledge and the consequences flowing from that, in her dealings with the stronger party. It is when these elements are considered together that the appellant's case fails. 102 I thus agree the appeal should be dismissed with costs. 103 BRYSON JA: During the hearing I strongly felt the need to be assured that the parties had considered fully the possibility of agreement to settle their dispute, and the Court adjourned for a short time so that this could be considered. The hearing on appeal is late in the day for compromise, but I felt, as did [NAME_3], that I should be sure that this had been considered. We have witnessed a family tragedy. 104 These proceedings have several unfortunate characteristics which I have recurringly seen in Equity suits. One is that closely related persons litigate at length over family property and incur costs which are not well proportioned to the value of the property in dispute, so that there can be little for the winner to enjoy and disaster for the loser: the parties cannot afford their conflict and the prize is not worth the expense, or the injury to family relationships. A second is that claims to be in adverse circumstances warranting equitable relief are made on a less than compelling basis. A third is that legal advice and assistance obtained when the transactions were put together does not in retrospect appear to have been very adept, although it was probably good enough to carry those involved through their affairs in the manner first intended if their relationship had not become hostile. A fourth is that after a full hearing and careful judgment, conflict is continued on appeal. A Judge in Equity recurringly sees families destroy their economic positions and well-being in similar ways, and it is not in the Court's power to stop it. 105 I agree with Giles JA.

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